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The founders of Skype last night were heading for a legal battle with the new owners of the internet telephony business over the technology that powers it.
A court case between eBay, the owner, and Janus Friis and Niklas Zennstrom — a fight that eBay admitted could shut down the service — is to be heard next June. Despite this, a private investment group agreed last week to pay $2 billion (£1.2 billion) for a majority stake in Skype.
Speculation that the new investors — which include Silver Lake Partners, the private equity firm, and Andreessen Horowitz and Index Ventures, the venture capital firms — had cut a deal with the founders to resolve the litigation were wide of the mark, people close to the case told The Times.
Mr Friis and Mr Zennstrom, who fell out with eBay over its running of Skype and whose attempts to buy back the company this year were rebuffed, have said that they are determined to defend their rights.
EBay paid $2.6 billion for Skype in 2005 but did not buy the core technology, licensing it instead from Joltid, Mr Friis and Mr Zennstrom’s company. After the pair left Skype, they allege, eBay executives began to alter the code used in the technology in breach of the licence. In March this year, Skype sued in an attempt to settle the dispute and Joltid countersued.
A person familiar with the case said: “This issue will continue whatever happens to Skype, as no one expects Joltid simply to sit back and allow its technology, rights and value to be damaged.”
Skype, which started in 2002, allows users to make calls from their computers to landlines, mobile phones and other computers. At its heart is the peer-to-peer technology created by its founders, who also devised Kazaa, the file-sharing software.
The service has continued to grow rapidly. Skype’s second-quarter revenue increased 25 per cent on the same period last year to $170 million. It added 37.3 million users, bringing the total to 480.5 million and making it the most widely used international calling system in the world.
The prospective owners of Skype have tried to limit the damage that the Joltid court case might do by striking a deal to pay only half of any damages awarded by the court. In eBay’s filing to the Securities and Exchange Commission, the US regulator, the company states: “With respect to certain specified litigation matters, the sellers have also agreed, among other things, to bear 50 per cent of the cost of any monetary judgment that is rendered following the closing of the transaction.”
The filing states that completion of the sale is subject to, among other conditions, “the absence of any injunctions relating to certain specified litigation matters”. The filing reveals that eBay has to get the consent of the new owners if it wants to agree a settlement with Joltid before the deal is finalised.
EBay will retain 35 per cent of the company under the deal announced last week. The online auction business was forced to write down about $1.4 billion of its investment in Skype in 2007. The $2 billion sale price for 65 per cent of the business means that eBay roughly breaks even on the deal.
A figure likely to be central in any negotiations between the investment group that has bought Skype and its founders is Mike Volpi, a former director of Skype whom it made chief executive of Joost, a video-sharing business set up by Mr Friis and Mr Zennstrom that uses similar peer-to-peer technology. He resigned from Joost in early July, becoming a partner at Index Ventures in London.
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